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Top 5 Things to Watch in Markets in the Week Ahead: Earnings, Fed, And Jobs Report

EconomyOct 31, 2021 07:45AM ET
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© Reuters.

by Daniel Shvartsman

Despite high-profile earnings report misses, a central bank surprise decision, and uninspiring economic data, markets pushed higher to close out October. The leading U.S. indices - S&P 500, NASDAQ Composite, and Dow Jones Industrial Average - each set all-time high closes. European indices moved higher as well, and cryptocurrency trading saw a bevy of spikes and all-time highs. That market optimism will be tested from all sides this week, as a slew of corporate earnings, non-farm payrolls, and a Fed meeting that is expected to signal the start of QE tapering.

Here’s what you need to know to start your week.

  1. Earnings Season Rolls On

Earnings continue to be the main story in stock markets around the world. While many of the biggest names have already reported, with Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) being top performers last week and Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Facebook (NASDAQ:FB) - soon to be Meta - lagging, a much wider swath of companies will update on Q3 this quarter.

Those include:

  • Travel companies such as RyanAir (LON:RYA) (Monday), Air Canada (TSX:AC) (Tuesday), Booking Holdings (NASDAQ:BKNG) (Wednesday), Expedia (NASDAQ:EXPE) (Thursday), and Amadeus IT (MC:AMA) (Friday).
  • Commodity producers or related companies such as ConocoPhillips (NYSE:COP) (Tuesday), Diamondback Energy (NASDAQ:FANG) (Monday), Williams Companies Inc (NYSE:WMB) (Monday), Mosaic Co (NYSE:MOS) (Monday), CF Industries (NYSE:CF) (Wednesday), EOG Resources (NYSE:EOG) (Thursday), Dominion Energy Inc (NYSE:D) (Friday), and Enbridge (NYSE:ENB) (Friday)
  • Tech companies from e-commerce to semiconductors to software, such as NXP Semiconductor (NASDAQ:NXPI) (Monday), Arista Networks (NYSE:ANET) (Monday), Activision Blizzard (NASDAQ:ATVI) (Tuesday), Electronic Arts (NASDAQ:EA) (Wednesday), Etsy (NASDAQ:ETSY) (Wednesday), Datadog Inc (NASDAQ:DDOG) (Thursday), Skyworks (NASDAQ:SWKS) (Thursday), Carvana Co (NYSE:CVNA) (Thursday),and Wayfair (NYSE:W) (Thursday).
  • Industrials and Pharmas such as Pfizer (NYSE:PFE) (Tuesday), T-Mobile US Inc (NASDAQ:TMUS) (Tuesday), Eaton (NYSE:ETN) (Tuesday), Cummins (NYSE:CMI) (Tuesday), Emerson (NYSE:EMR) (Wednesday), Humana (NYSE:HUM) (Wednesday), CVS Health (NYSE:CVS) (Wednesday), Toyota Motor Corporation ADR (NYSE:TM) (Thursday), and Honda Motor Co Ltd ADR (NYSE:HMC) (Friday).

Supply chain issues and inflation will of course be on investors' minds as they watch these reports, as well as how much the Q3 U.S. growth slowdown hit these companies, and what that means for their respective outlooks. As companies lap pandemic affected quarters, figuring out what is the new normal for companies that are either recovering or were big 2020 winners will also be on the docket.

  1. Non-farm payrolls

After October’s disappointing jobs report and the muted GDP number, November’s nonfarm payrolls report will test the strength of the U.S. economic recovery. Expectations are for 385K new jobs, after the NFP missed expectations in each of the last two months.

Whether that lull was temporary and due to either the summer delta variant surge or supply chain issues remains to be seen. The report may weigh on the speed of Fed tapering, and might also give added impetus to Democrats in Congress on their budget package negotiations.

  1. Fed Meeting

The Fed Open Market Committee (FOMC) report comes out at 2pm on Wednesday after a two-day meeting. Fed chair Jerome Powell has said in recent weeks that the plan to start tapering in November is still on, so the question is whether that will bear out.

The Bank of Canada’s announcement last week that they would stop quantitative easing caught some by surprise, and it remains in question both how quickly central banks will move away from pandemic-era extraordinary measures and how the economy and the markets will react.

Also to watch in Powell’s comments and the press conference that follows is what his current view on inflation is, after the debates over whether it is transitory or persistent, and what that means for the pace of interest rate hikes in the months (years?) to come. Of note, the US Dollar popped on Friday after trading lower much of the month, and will be in focus if there are any surprises.

On Thursday, the Bank of England releases its November monetary policy decision, with many in the markets expecting a 15 basis points hike. How markets handle the return of monetary tightening remains to be seen, no matter how much it is ‘priced in’ already via expectations.

  1. Manufacturing PMI reports

As we enter the holiday season to finish the year, the supply chain snarls and various growth slowdowns will be in the spotlight. A number of PMI reports come out this week. China already kicked off with a disappointing 49.2, marking reduced activity. The U.S., U.K., Germany and other Euro Zone countries will all report. Expectations are for expansion across the board - numbers above 50 on the index - and will give an additional indicator on how the global economy sets up to finish the year, and perhaps how long consumers will have to purchase their holiday presents in advance.

  1. Crypto: Another Bitcoin ETF, And Monetary Tightening

Two weeks ago it was Bitcoin, and last week it was ETH/USD as a leading cryptocurrency to set a new all-time high. Meanwhile, smaller and less grounded coins such as Shiba Inu continue to grab headlines.

There are two headline stories to watch for crypto impact this week. First, a third bitcoin ETF is expected to start trading, as the VanEck Bitcoin Strategy ETF (NYSE:XBTF) is expected to list by Wednesday. Excitement over the first ETF, ProShares Bitcoin Strategy ETF (NYSE:BITO), may have propelled bitcoin to all-time highs, but the response to the second, Valkyrie Bitcoin Strategy ETF (NASDAQ:BTF), was more muted.

It’s also worth watching how the crypto complex reacts to a tightening environment. Much of the investment thesis for crypto is tied to inflation and the value of money; an increase in the cost of capital via central bank tightening could make traditional currencies and assets relatively more attractive. While in large part a coincidence, the tightening cycle in 2018 and the simultaneous off year in crypto may be worth keeping in mind even as optimism in the sector remains high.

Top 5 Things to Watch in Markets in the Week Ahead: Earnings, Fed, And Jobs Report
 

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Comments (15)
Empire Destroyer
Empire Destroyer Nov 01, 2021 4:50AM ET
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Everything I read just says it's bullish regardless what analysts commentators or anyone says...
Antonio Velardo
Antonio Velardo Oct 31, 2021 6:22PM ET
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How about the futures…start looks good.
Rodney Dangerfield
Rodney Dangerfield Oct 31, 2021 4:10PM ET
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50 people control 50% of Bitcoin mining worldwide
William Bailey
William Bailey Oct 31, 2021 2:28PM ET
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Hahaha . The fake unemployment numbers are comimg back to haunt the fed !! Unemployment dropping because people falling off rolls!! Liquidity issues NOW. Fed strugling to supply liquidity and using Reverse Repo market to buffer , but much going to crypto and completly wasted ….. the end is near
Darrell Peterson
Darrell Peterson Oct 31, 2021 12:30PM ET
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I'm on the edge of my seat in anticipation of what will be revealed and more so looking forward to how utterly ridiculous it will be interpreted .
Steffen vdm
Steffen vdm Oct 31, 2021 12:30PM ET
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Markets will still go up, even if they would stop printing , triple interest rates, make Kanye West POTUS and nuke China.
William Bailey
William Bailey Oct 31, 2021 12:30PM ET
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Trump grows another mushroom head , so print more credit !!!
jason xx
jason xx Oct 31, 2021 12:20PM ET
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I'm timing the market. Correction this week
William Bailey
William Bailey Oct 31, 2021 12:20PM ET
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Could be … Fed struggling to provide free liquidity … our debt buyers are almost tapped out . Collapse of assets soon
Nish Kuma
Nish Kuma Oct 31, 2021 10:48AM ET
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Thanks
Mauricio Pelta
Mauricio Pelta Oct 31, 2021 10:46AM ET
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Txs
PETR HRDINA
PETR HRDINA Oct 31, 2021 10:39AM ET
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Brilliant summary Daniel. Thanks!
Jonathan Asamoah
Jonathan Asamoah Oct 31, 2021 10:22AM ET
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Thank you
Appiah Evans
scanity Oct 31, 2021 10:15AM ET
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Thanks
New Jazenevd
New Jazenevd Oct 31, 2021 10:13AM ET
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No changes ahead: weak economy, strong market.
Nguyen Anh
Nguyen Anh Oct 31, 2021 10:13AM ET
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how weak economy but strong market, it seems to be fraud
New Jazenevd
New Jazenevd Oct 31, 2021 10:13AM ET
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Nguyen Anh  Fraud? You use wrong word. Market is pushed higher by money printing. The same money printing makes economy worse. Clear now?
Nguyen Anh
Nguyen Anh Oct 31, 2021 10:13AM ET
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New Jazenevd  haha so that why it's fraud system, the gov controls the economics, bad idea
Randall Paul
Randall Paul Oct 31, 2021 10:05AM ET
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thanks but 8 think the Fed and the administration will pump those numbers how they want. times have changed and they need time to figure this all out. watch everything will be favorable to the economy
SLM McKinney
SLM McKinney Oct 31, 2021 9:09AM ET
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Thanks
Mohd Izhar Muslim
Mohd Izhar Muslim Oct 31, 2021 8:48AM ET
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This is good information all about, thanks for the article 👍👍👍
 
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